Executive Summary: October 09, 2009
By Scott Rochfort | smh.com.au | 09 October
Tom Albanese..wonders if it was the garlic at breakfast.
CBD
Sexy siren makes an offer hard to refuse
The online retailer Adultshop was taken by surprise yesterday with a $5.2 million takeover bid from a Melbourne chain of sex stores called Sexyland.
The self-described "chain of female-friendly adult department stores" said Adultshop investors had the "opportunity to exit an underperforming company".
Shares in the company surged 0.1c to 1.1c after Sexyland, founded by the former car exhaust salesman Angelo Abela, criticised Adultshop's record as a public company.
It highlighted how Adultshop's market capitalisation had fallen from $600 million to $3 million over the past decade.
In an odd twist, Sexyland urged Adultshop shareholders to take up their entitlements in the company's current 0.4c non-renounceable entitlement issue, which will raise another $1.2 million in cash. Sexyland then proposes to pay back shareholders whatever they paid for the rights issue.
It warns that Adultshop could find itself majority-owned by entities related to its directors if shareholders do not take up the offer. Adultshop is believed to be interested in using the funds to exit the sex sector through a backdoor listing or the acquisition of another company.
Its chief executive, Mal Day, who owns 15 per cent of the company, is expected to oppose the bid. "I've read it through once and I'm about to read through it again," Day told CBD.
The Australian Competition and Consumer Commission is not expected to block the bid even though Adultshop has an internet joint venture with Sexyland's key rival, Club X.
In its blurb to Adultshop shareholders, Sexyland says its "success is attributed to its friendly yet professional customer service coupled with warehouse-sized stores which have been uniquely designed and decorated to make shopping at Sexyland a fun and exciting experience".
The company lists one of its top products as a device called a Muffin Mucker.
Spare shares
Seven Network shareholders will have the chance next month to grant another truckload of options to the company's chief executive, David Leckie, and the commercial director, Bruce McWilliam. Resolutions put up for the meeting include the approval of the "acquisition" of 3 million options by Leckie and 2 million options by McWilliam.
Leckie's first proposed tranche of 1.5 million options will be exercisable at $7 each from the middle of next year.
A batch of 1 million will be exercisable at $8 in mid-2011 and the last 500,000 at $9 in mid-2012. Seven shares rose 10c to $6.40 yesterday.
High turnover
Rio Tinto's chief executive, Tom Albanese, appears to be finding it increasingly hard to keep staff.
Several senior executives have already gone to Rio's larger rival BHP Billiton, and now others are departing for smaller mining companies. Yesterday the goldminer Newcrest welcomed the appointment of Rio's Australian managing director, Stephen Creese, as its new company secretary.
Creese was one of the main Rio executives spruiking Chinalco's proposed "strategic alliance" in Canberra earlier this year. "He is extremely experienced and well regarded, and his credentials are unmatched," gushed Newcrest's chief executive, Ian Smith, in a statement to the market.
Smith should know. The Broken Hill-born mining executive joined Newcrest after quitting as Rio's head of technology in 2006. Newcrest paid him $6.1 million last financial year, a lot more than what Albanese is expected to receive this calendar year.
Rabbit to rescue
Is this the era of the celebrity entrepreneur? Having been inflicted with Wizard's founder, Mark Bouris, Australian television viewers will soon have to cop another batch of millionaires showing their human side.
Because of the poor ratings of the Bouris-hosted Apprentice, Channel Nine brought forward the first episode of the Russell Crowe-hosted Secret Millionaire last night.
The show takes wealthy people from their lavish surroundings and puts them in hard-up neighbourhoods. But it seems that Crowe did not look too far to find well-off people wanting to show their compassionate sides.
The guest on last night's show was the property developer and owner of Trivest, Albert Bertini, who is helping redevelop the retail and commercial space at Crowe's beloved Souths Leagues Club.
Bertini co-owns High Concept Commercial with Crowe's fellow Rabbitoh owner Peter Holmes a Court, a firm that paid $7 million for the club in Chalmers Street, Redfern, in 2007.
Another guest on Rusty's show will be Derek Leddie, who sold his market research firm The Leading Edge to Photon Group for $15 million in 2004.
The goatie-bearded Leddie lives near Crowe on Finger Wharf, Woolloomooloo. But the show's third guest, Peter Bond, the managing director of Linc Energy, has denied any previous links to Crowe.
"I don't know big Russ," Bond told CBD . "I don't even go for the Bunnies," the supporter of the St George-Illawarra Dragons threw in. But for his part on the show, Bond was still made to hang out in the heart of Rabbitoh's territory, spending 10 days in Redfern.
Floating palace
Royal Dutch Shell was keen to stress yesterday that its planned $US5 billion ($5.54 billion) floating platform off the West Australian coast was about delivering LNG.
Asked if the offshore platform, which is in Australian territorial waters, aimed to dodge WA state taxes, Shell's head of international upstream operations, Malcolm Brinded, noted: "If the guys can find a way of not paying taxes, it is always a good idea. [But] that is not one of the drivers, let's put it that way."
To hose down any concerns Shell could rip off the good folk of WA, Brinded assured a media conference in Perth there would be hundreds of jobs for local workers on the plant and the Anglo-Dutch company would pay state taxes. He also noted the platform would be 2 times bigger than the WACA.
Going cheap
Multiplex Prime Property Fund seems to have become the second listed company (after BrisConnections) quietly praying for the Australian Securities Exchange to delist it.
A day after seeing off a challenge to wind-up the property fund from the Melbourne-based scarf-wearing corporate agitator Nick Bolton, Brookfield Multiplex launched its massively dilutive 178-for-1 entitlement offer yesterday, aimed at raising $50 million to pay downthe fund's debts.
The offer will also allow existing unitholders to cut their losses and sell their securities to Brookfield for 0.1c apiece.
The fund appears to be hoping that the risks highlighted in its entitlement offer booklet come true.
One of them is the potential "removal from ASX's official list". It warns that after the "cash-out" offer and capital raising, the fund may have "an insufficient number of unitholders on the register to satisfy the requirements of the ASX listing rules".
It will all depend on how many of the fund's 1600 unitholders want to cash-in their securities for that 0.1c offering price.
Insider
Edited by James Freed
BBI shareholders ponder alternative to a wipe-out
Private equity groups are not the only ones floating companies these days.
Babcock & Brown Infrastructure's recapitalisation plan outlined yesterday is so extensive – and leaves so little for existing shareholders – that it is effectively a $1.8 billion initial offering.
And just as TPG could decide to pull the Myer offering at the last minute if market conditions don't seem right, the existing shareholders of BBI will have the right to vote down the refloat of their company.
There are few institutions remaining on the BBI register, which means retail shareholders have to decide whether a 4c distribution plus the chance to participate in a $250 million share purchase plan is better than facing a complete wipe-out via administration.
The recapitalisation seems to make more sense, but some investors could seek to punish a management team that has admitted many of BBI's assets have no equity value at all.
Grant Samuel has been appointed an independent expert to opine on whether the deal is fair and reasonable to shareholders and hybrid holders.
It is possible it could find the deal is "not fair" due to the dilution involved and the rights granted to the new cornerstone investor, Brookfield Asset Management, in the event it is not approved, but "reasonable" compared to the likely alternative of administration.
That would give shareholders even more food for thought. In total, $104 million will be distributed to shareholders. It is worth noting this is slightly less than the $105 million in total fees associated with the raising.
Credit Suisse and Macquarie Capital have underwritten the raising, although they have already passed off the risk by finding sub-underwriters for the entire placement.
Meanwhile, Brookfield is set to receive at least $5 million a year of its own in return for managing some of BBI's assets that lack any remaining equity value.
It will also receive transaction fees of 1 per cent of the enterprise value of any businesses sold. Enterprise value, of course, includes the value of debt.
Eyes on conoco
The US oil giant ConocoPhillips has told Insider it is "business as usual" in Australia despite revealing plans to slash global capital spending and to sell $US10 billion of assets over the next two years.
Strangely, it has decided to increase its dividends at the same time, leading some to question whether it is presenting itself as a takeover target.
In any case, Conoco's decision to splash out at least $6 billion on a coal-seam gas joint venture with Origin Energy in Queensland – a move that allowed Origin to fend off a hostile bid from BG Group – has been cited by analysts as one of the ill-timed moves that has forced Conoco to conserve capital.
The Origin-Conoco project is one of four proposals for a very large-scale liquefied natural gas facility at Gladstone based on coal-seam gas resources.
Even before Conoco announced the spending cuts on Wednesday evening, there were suggestions the Origin-Conoco project was not moving as quickly as some others and it was one of the more likely participants in a potential consolidation of two or more of the rival projects.
Industry insiders think BG is likely to go it alone in Gladstone, whereas the others are more likely to seek partners. All four groups – BG, Origin-Conoco, Santos-Petronas and Shell – have admitted to talking to the others about partnerships.
"We can contemplate going on our own but we're very happy to contemplate consolidation, and we're ready and in discussions on that front," Shell's executive director of international upstream, Malcolm Brinded, said yesterday.
It is tough getting a group of multinational oil companies to agree on anything, but Conoco is said to have been particularly difficult to date. Now that Conoco has sorted out its corporate strategy, perhaps that will serve as a catalyst for it to enter more advanced negotiations.
Origin-Conoco has what is widely acknowledged as the worst plant site among the Gladstone projects due to the need for extensive dredging.
Most in the industry think the Origin-Conoco project is the likeliest to take part in any consolidation. Some sources say a deal between Origin-Conoco and Santos-Petronas is the most likely, while others are punting on an alliance between Origin-Conoco and Shell.
Conoco could reveal more details of its plans alongside the release of its third-quarter results on October 28.
Brighter note
After the takeover of Lion Nathan, independent Australasian beverages companies are a scarce commodity.
In that context, it is notable that the latest sales statistics show Independent Liquor, owned by the private equity group Pacific Equity Partners, has finally seen sales level off from the huge plunge that accompanied the introduction of the higher tax on ready-to-drink beverages last year.
Nielsen data shows sales of Independent's Woodstock Bourbon and Cola rose 2.7 per cent in August compared with the same month last year, and other products are also believed to be doing well. Independent has been named as a possible float candidate, although Insider hears it is probably behind Link Market Services and REDgroup Retail in the queue of potential floats from PEP.
A trade sale of Independent – or even an onsale to another private equity group – would represent other viable exit options.
Briefs
Pharmaceuticals
CBio for hip list Drug developer CBio is plans to list on the Australian stock exchange and raise up to $40 million to complete trials of its lead compound for rheumatoid arthritis. CBio is still to settle the number of shares it will offer and the price.
Impairments
Adelaide fund hit Impairment charges for Adelaide Managed Funds Asset Backed Yield Trust have been greatly raised – from $4.3 million to $16.7 million – due to its indirect exposure to the collapsed agricultural manager Great Southern group.
Capital raising
Sigma shunned Retail investors in Sigma Pharmaceuticals rebuffed the company's equity raising, with only 32 per cent of shareholders taking up their entitlements under the $163 million retail component of the offer. Last month Sigma announced a $297 million capital raising after it bought an established pharmaceutical brand portfolio and manufacturing facility from the global pharmaceutical firm Bristol-Myers Squibb.
Gold
Norton cuts output Norton Gold Fields has cut its gold production forecast for 2009-10 by 12 per cent. It now estimates production for the year at 175,000 ounces, still higher than the 135,067 ounces in 2008-09.
First published by Smh.com.au on October 09 2009
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